Real estate agents may choose to specialize their practice according to certain types of clients, properties, or locations. Learn more about the different real estate domains and gain an understanding of the pros and cons of specialization.
Real Estate Domain Specialization
Ted just got his real estate license and is putting serious thought into how he's going to approach his career. He knows that some of his real estate friends are generalists, meaning they work with all types of buyers, sellers, and properties. But others are specialists. They focus their real estate work in a particular niche, or real estate domain.
Real estate domains can be broken down into three basic categories: type of client, type of property, and type of location. In this lesson, we'll look at examples in each of these categories and evaluate the pros and cons of specializing in real estate domains.
Types of Clients
Client-based specialization involves working with specific types of customers. Ted likes the thought of helping people realize their dream of home ownership. He could choose to follow his passion and work exclusively with first-time homebuyers. Of course, that isn't Ted's only option. Since there are a lot of distressed properties in his area, he could instead choose to specialize in clients who need to sell fast or property investors who want to buy cheap.
Other types of clients that Ted could focus on include:
- Senior citizens
- Ranchers or farmers
- Individuals who are relocating
Types of Properties
Some agents focus on properties rather than clients. Property specialization involves the type of building or property the client is buying or selling. The two most well-known property types are residential and commercial. But there are many subcategories that can be considered as well.
For example, Ted's town has a district with quite a few historical properties. As a member of the local historical society, Ted is very familiar with these properties and feels like he could effectively sell them to interested parties. Ted could also consider working with real estate owned (REO) properties. Remember, Ted's area has a lot of distressed properties. If lenders have an excess inventory of REO properties (foreclosed properties that did not sell at auction), Ted could get those properties on the market.
Some other types of properties that Ted could specialize in include:
- Luxury homes
- Apartment buildings
- Retail spaces
- Industrial properties
- Suburban office buildings
Types of Locations
If Ted doesn't want to focus on specific types of clients or properties, he could consider a third real estate domain: location, which involves the overall area surrounding a property. Every good real estate agent knows that location can seriously impact the value of a property. Since Ted is very familiar with the geography of certain neighborhoods in his town, he could specialize in helping others to buy and sell in these neighborhoods. For example, Ted could focus on the waterfront or the downtown area.
Other examples of location specializations include:
- Golf course communities
- Vacation communities
- Master-planned communities
- Rural areas
Pros and Cons of Specializing
Specialization offers a number of advantages for real estate agents like Ted. Let's go over a few of them. To start, a niche practice can help a real estate agent build a level of competency in a particular area. Agents can then use their experience to develop a process that streamlines buying and selling for that specialization. But one of the strongest aspects of specializing is the branding potential. Think about it: when people want an expert, they often turn to specialists. If Ted markets himself as a specialist, he may have greater attraction potential than an agent who does not specialize.
Of course, specialization has its drawbacks too. If Ted markets himself as a first-time homebuyer specialist, he might put off potential clients who do not fall into that category. It can also be risky to focus on a narrow real estate domain. For example, if Ted specializes in distressed properties, and the number of foreclosures in the area drops significantly, he's not going to have much business. The same is true if he specializes in vacation homes in a bad economy. If the bulk of the population is struggling financially, most people won't be in the market for a vacation home.
One final consideration is the size of the agent's market. Specialization can work well for real estate agents in urban areas, but agents in rural areas may have to work as generalists and handle many different types of properties, clients, and locations to have a successful career.
A real estate domain is a niche that real estate agents can specialize in. The three main domain classifications are client, which involves working with specific types of customers; property, which involves the type of building or property the client is buying or selling; and location, which involves the overall area surrounding a property. Examples of clients include first-time homebuyers or investors. Property types include commercial, residential, and agricultural properties. Location examples include geographic areas, like the waterfront or downtown. The pros of specialization are the ability to build competency and marketing potential. Cons of specializing include the risk of turning away customers and the chance of a dwindling market.